A four percent annual increase in the average claim size is responsible for the growth of long-term care liability costs, according to a study on 2011 long-term general and professional liability actuarial analysis by the Aon Corporation and the American Health Care Association.
Nationwide, the severity of liability claims increased steadily from $125,000 in 2005 to $153,000 in 2010. In 2011, claims severity is projected to reach $159,000. In addition, the average annual loss rate per bed, which has hovered around $1,400 for the past five years, is projected to be $1,430 in 2011. Likewise, since 2005, the loss cost as a percentage of the Medicaid per diem reimbursement rate has been near its 2010 level of 2.22 percent.
The yearly analysis measures the severity and frequency of liability claims, tracks the loss rate (liability cost) as a percentage of the Medicaid per diem reimbursement rate and calculates the overall loss rate per occupied long-term care bed in the U.S. to help gauge the level of risk facing long-term care providers.
Recommended For You
While claim severity has grown, analysis shows, liability claims has frequency decreased from 1.07 percent in 2003 to 0.91 percent in 2010. Claims frequency is projected to drop slightly to 0.90 percent in 2011, which means less than one liability claim will arise for every 110 residents in a long-term care facility.
The increase in the size of claims outweighs the decrease in claim incidence. The resulting growth in liability costs is important for long-term care providers, who also must contend with uncertain Medicaid funding and cuts in Medicare reimbursement, which took effect in October 2010. Providers need to explore ways to control the growth of liability costs to preserve an already threatened funding base, the report found.
"For the long-term care profession, controlling liability costs is necessary if we are to make do with dwindling resources for patient care and adequate staffing," says former Kansas Governor Mark Parkinson, president and CEO of AHCA, in a statement.
Tort reform has been used to help control liability costs, as the way tort reform legislation is drafted is critical to its effectiveness, the report says.
The report also found that California, Kentucky, Tennessee and West Virginia face the highest costs.
Approximately 17,000 individual non-zero claims from long-term care facilities were aggregated by Aon Risk Solutions Actuarial and Analytics practice to perform this analysis.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
